It’s fair to say that until very recently, many organisations have treated their relationship with contractors as a transactional exchange of skills for salary, rather than the strategic engagement of skilled workers to solve complex challenges.
A combination of ‘mega-trends’, including pandemic-inspired digital progress, a global shortage of skills and the increasing flexibility and fluidity of work have reshaped our collective understanding - to an extent.
Tough times have forced organisations to be more ambitious and creative in their integration of contingent workers. The numbers speak for themselves, with the projected gross volume of the gig economy expected to reach $455 billion dollars in 2023
As the popularity of contractors continues to grow, organisations who fail to account for their non-permanent population will lose out in the battle for skills and expertise.
In the blog below, I reflect on the importance of the Contractor Value Proposition (CVP) – and how a promise to your contingent talent could be a key differentiator amid a tightening labour market.
From tactical use to strategic deployment
In comparison to its full-time employee equivalent the Employer Value Proposition (EVP), the development of the CVP has lagged significantly. Traditional structures and silos are at the heart of this underdevelopment. Historically, the EVP has been ‘owned’ by the HR function or another centralised group (such as People and Culture). This ownership creates accountability. Teams are tasked with attracting, engaging and onboarding the best permanent staff, and you’ll see their efforts to better understand their workforce in the form of regular surveys, evolving benefits packages and exit interviews.
In stark contrast, ‘ownership’ of the contractor community is dispersed across the organisation, with individual business units and hiring managers responsible for identifying and attracting the skills they need.
A lack of cohesion creates blind spots, impacting an organisation’s understanding of:
- The volume of contractors within the organisation, including the systems they access, the length of engagement and the teams they integrate with.
- The value that these contractors add to the organisation, such as access to niche skillsets to progress and propel projects forward.
- The legislative implications of engaging contractors, which often creates a barrier in communicating with contractors, as organisations navigate co-employment concerns.
But we can no longer lean into a lack of visibility. The world of work demands agility, and organisations are required to change faster than ever before to keep pace.
Many companies can’t achieve this level of dexterity by relying solely on the resources they have today. The skills needed to succeed are ever evolving, and organisations are looking to contractors to leverage their expertise in driving forward change agendas, or leading the implementation and integration of technologies, for example.
A strong CVP is critical
Contractors are firmly in control of their careers, and current talent shortages mean these workers have even greater choice when it comes to their next move.
We’re also looking ahead to a period of relative economic downturn. While the impact will vary across regions, we tend to see greater interest in non-permanent workers during times of instability and uncertainty. Data from our annual report reflects this trend
; in FY22 we sourced over a quarter of a million temporary roles, an increase of 30,000 from the year before.
A strong CVP is therefore a key tool for organisations to attract the skilled professionals they need.
But it must run deeper than simply engaging their interest. The Contractor Value Proposition must incorporate all elements of the worker lifecycle, including onboarding, retention and reengagement.
Turning intention into action
We’ve established that competition for contractors is fierce – and a fit-for-purpose CVP is a vital tool in this battle. But how can organisations craft an offering that speaks to the skilled professionals they so urgently need?
Organisations may be searching for a ‘catch-all’ CVP, but personalisation is integral. In every other aspect of their lives, individuals are offered tailored communications that speak directly to their needs or challenges – and this expectation has extended to the world of work.
Not all contractors are engaging with the organisation on a high-skill, high salary basis, nor are they operating in the same departments or seeking the same benefits from their engagement with your organisation.
While this creates complexity, it simultaneously offers the building blocks for your CVP. Find the common threads that unite these workers in spite of their differences, which may include:
- Flexibility: Compressed work weeks and a greater say in selecting shift patterns may entice the contractors eager to maintain control over their career.
- Reward and recognition: A competitive salary aligned to the wider market remains vital, but it’s no longer limited to what you pay your contractors. Conversations around on-demand pay as a competitive differentiator are gaining traction, as a growing number of organisations seek to offer greater financial stability to their non-permanent workforce.
- Development opportunities: Legislation has previously made learning and development a difficult topic of discussion with contractors. But with talent in short supply, organisations may need to consider how they keep their network of contractors ‘warm’. Sending regular communications that showcase development opportunities or interesting project work illustrates a commitment to their progression.
With key pillars in place, organisations can then tailor their CVP to accommodate different segments. The value proposition that resonates with an IT contractor, for example, will look different to someone who is staffed within a call-centre environment.
At this stage, it’s vital to ensure contractors are given a degree of choice. I recently came across Langer’s lottery experiment
. Fifty-three office workers were sold a $1 lottery ticket. Half of the workers were handed a ticket by the experimenter, and half were allowed to choose the tickets themselves.
A few days later, just before the lottery was drawn, workers were approached and asked how much money they would require to give up their ticket. Those who hadn’t been able to select were willing to return their ticket for just $2. The group who had picked their ticket, however, demanded a more significant mark-up of $8.
Langer attributed this higher asking price to the illusion of control, where people believe they are more likely to ‘beat the odds’ if they have a hand in shaping their circumstances.
I draw a number of parallels between this experiment and the importance of choice. The ability to secure emotional buy-in to your organisational purpose and ambitions is enhanced simply by enabling contractors to select the pillars of your CVP that speak most directly to their specific circumstances.
In a departure from the experiment, however, this choice shouldn’t be an illusion. As an organisation, you should look for opportunities to empower your contractors with the tools they need to succeed.
Set the tone, and maintain it
Your CVP should set the tone of how you want to engage with contractors. From the outset, you need to clearly define what it is that you'll offer as an organisation.
There also needs to be a wider change management piece to ensure that this proposition is upheld in every interaction across the workforce lifecycle, from engagement and onboarding to their departure and transition to a part of your alumni network.
Similar to other strategic shifts, this transition needs to be led by senior stakeholders who encourage teams to:
- Adapt their language: When teams see contractors for the skills they provide, rather than the terms of their engagement, we transition to a workforce strategy that is far more holistic in approach. The lines are no longer drawn by ‘perm’ and ‘non-perm’, but by the skills and expertise that individuals bring to solving challenges or powering growth.
- Reflect on their actions: Contractors are integral in project delivery, so when celebrating success, it’s important to highlight their contributions in reaching these milestones.
And this commitment to celebrating involvement needs to be maintained in the offboarding process. The tone on which you finish the conversation is the one that contractors will take to future conversations. When they’re asked to give their opinion on your organisation, make sure their answer reflects the promise you made at the outset.
Remain mindful of legislation
The ability to work with anyone, from anywhere, is a huge attraction to both contingent workers and the organisations looking to widen the scope of their search.
But when engaging across borders, organisations will need to remain mindful of permanent establishment rules. Article 5 of the OECD Model Tax Convention
, for example, states that if an employee exercises the power to bind the organisation into contracts with local clients, or a home office is used on a continuous basis for the purpose of ‘carrying out the business’, the employer may be liable to pay corporate and employment taxes.
Questions around tax, co-employment and permanent establishment will vary between countries, so it’s integral to have on-the-ground experts to shape your understanding.
Taking care of your contractors
The value added by contractors can no longer be ignored.
Organisations need to ensure they have an attractive value proposition in place, as well as the software tools, marketing strategy and contemporary insights to both position and leverage their CVP amid busy talent networks.
With the support of a market-leading workforce solutions partner, organisations can increase candidate flow and create opportunities for high quality candidate engagement. To explore how we could elevate your Contractor Value Proposition together, talk to our team today
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